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14 January 2000 | Translation of the German ad-hoc announcement

Munich Reinsurance Company

Munich Re Group: Winter storms cost up to DM 1bn / Unchanged dividend of DM 1.80 per share envisaged nevertheless: owing to stock split, this would mean a doubling of the overall amount distributed / No significant material damage losses as a result of date changeover from 1999 to 2000

The losses from the December storms "Lothar" and "Martin" will cost the reinsurers and primary insurers in the Munich Re Group up to DM 1bn (EUR 0.5bn). The overall economic loss caused by the two winter storms is estimated at more than DM 27bn (EUR 14bn), with some DM 12bn (EUR 6bn) of this apportionable to the international insurance industry. To quote Dr. Hans-Jürgen Schinzler, Chairman of the Munich Reinsurance Company's Board of Management: "Occurring shortly before the year-end balance sheet date, Europe's most damaging storms since 1990 were by far the most expensive natural catastrophe of the past year. Nevertheless, we will still be able to make another appropriate allocation to our reserves and pay an unchanged dividend of DM 1.80." In other words, the company still intends to distribute an overall amount which, owing to its stock split at the beginning of 1999, will be double that of last year at DM 318m (EUR 163m). However, the exceptionally high claims costs in 1999 will probably mean that the Group profit for the year will not reach the previous year's level. In addition to the December storms, which wreaked havoc especially in France, there were claims burdens from such disasters as the Sydney hailstorm, Typhoon Bart in Japan, and the earthquakes in Turkey, Greece and Taiwan.

The date changeover from 1999 to 2000 has so far not resulted in any significant material damage losses for the Munich Re Group companies. Pessimistic predictions that the insurance industry would have to reckon with huge billion-dollar losses from sudden breakdowns and accidents have evidently not been fulfilled. Despite the widespread relief at this, Munich Re is continuing to adopt a reserved attitude and is waiting until any losses that may emerge gradually – in liability insurance, for example – have been identified and estimated.

Besides the natural catastrophes that occurred in 1999, the development of the insurance industry worldwide is marked by high costs for other losses and by the effects of excessive competition; thus, owing to the generally unsatisfactory market and loss situation in the USA in particular, Munich Re's subsidiary American Re-Insurance must probably reckon with an operating loss for the past business year. However, the overheated competition which has affected the markets in recent years is meanwhile showing signs of cooling: the winter storms in Europe were too late to have an effect on the renewals of insurance policies and reinsurance contracts at the end of the year, but they will have a strong impact on many insurers' and reinsurers' results. The already evident trend towards risk-commensurate prices and conditions should therefore strengthen further.

Munich Re, 14. January 2000